TIME TO READ: 4 MINUTES
The Reasons Why We Don't Have Enough Chips for Computers, Phones, and Cars
The world doesn't have enough semiconductors. It won't for the foreseeable future.
This can & will affect your business. Here's how.
The Vital Role Semiconductors Play in the World's Electronics
A semiconductor is a tiny electronic component, which can regulate electricity and react to light, heat, or touch.
They're a critical part of modern-day electronics. You can't build anything from a computer to a TV without them.
Factories to make semiconductors exist worldwide. Most of the big "chipmakers" operate in the U.S. (Texas Instruments, Intel, Infineon, NXP), Taiwan (Taiwan Semiconductor), Japan (AKM), and China (SMIC).
The world has a major shortage in semiconductors. The chipmakers aren't making enough.
Why not? A perfect storm of bad circumstances has hit them over the past 18 months.
- 2018-2019: Demand stays high for smart devices, cars, and phones. The rising "Internet of Things" gobbles up chips by the millions.
- Early 2020: Lockdowns. Chipmakers had to close down. Semiconductor production stops.
- Later 2020: Manufacturers begin reopening and experience huge surges in demand. This includes chipmakers themselves, and the production
of materials used in chipmaking (steel, silicon boards, copper, etc.).
- October 2020: A fire at the AKM plant in Japan disrupts their ability to build semiconductors.
- Early 2021: Winter storms in Texas block roads, kill power grids, and force businesses to shutter. Including chipmakers.
- June 2021: Severe drought in Taiwan leads to production issues at Taiwan Semiconductor.
- Summer/Fall 2021: Auto manufacturers begin releasing new models, which use many of the same chips found in computer monitors. This creates a multi-industry delay for chips used in display devices.
Where We Are Now
The chipmaker factories that can resume work have done so. They're working hard to meet the demand. However, they're still hamstrung by:
- Not enough workers
- Not enough materials
- Not enough lead time on orders
Other manufacturers are stuck waiting on the factories. They're cutting back their production as a result.
They don't want to! But without certain materials, they can't keep up. For instance, GM and Toyota. GM has had to slash its own production of cars because they can't get enough chips for them. Toyota did the same, cutting September production by 40%.
(The shortage could cost the automotive industry over $100 billion in revenue for 2021 alone!)
Much of the media talk about the shortage emphasizes its effect on car manufacturers. However, there's another aspect to the shortage that affects every other business...and that's a shortage of computers.
HP, Lenovo, and Dell all said they have to raise prices, due to high demand and low chip inventory.
Samsung plans to
build a new chip factory soon, likely in Texas. Intel has similar plans in Arizona.
More semiconductor production is great for the computer industry—but these factories take years to build. Even if Samsung broke ground today on their new factory, it wouldn't start producing chips until 2024.
We need more semiconductors yesterday!
How the Chip Shortage Affects Businesses (including Yours)
The chip shortage comes down to one result in the business world: Fewer devices made for the coming months.
Count on fewer:
- Wi-Fi routers,
- Networking hardware (firewalls, switches, etc.),
- And desktop computers.
This may mean you'll have to buy what you can get, rather than what you'd normally buy. And you'll pay extra—everything you do find will have higher prices, toward the end of the year and into 2022.
Recommendation: Buy Your New Computers Now!
We already see some supply shortages on laptops and network gear. Backorders have stretched out to 2-3 months.
We recommend ordering new equipment now for new hires, office moves, and server refreshes. Plan for a delay in shipping, so you'll have what you need when you need it.
The chip shortage continues to mess up supply lines worldwide. It's not ideal, but you should go ahead & pay what you need to for the devices you do need. Otherwise you risk not having anything to order…and then employees don't
have the tools to do their work!
(A final note: When you receive an IT hardware quote from PlanetMagpie, please approve it ASAP. Inventory keeps flying off the shelves, even for us. The quoted hardware may disappear the next day!)
Looking to improve your IT operations' efficiency this year? Contact us for a network review (no obligation!) at firstname.lastname@example.org.